How One Overdue Book Can Hurt a Credit Record

It may be wrong to return a library book late — or to never return it. But how severe should the punishment be? Should it include being saddled with a bad credit score?

Abraham Kleinman says no. Mr. Kleinman, a lawyer from Uniondale, N.Y., represented a Queens man who sued Unique Management Services for reporting his $295 late bill from the Queens Library system to credit bureaus. The man, Rabbi Avrohom Sebrow, won a settlement on a technicality — Unique’s license to operate in New York State had lapsed when it reported him — but Mr. Kleinman is still angry about the tactic that was used against his client.

A library fine is not really a debt, Mr. Kleinman argues, and should not be covered by regulations that allow collection agencies to report bad consumer behavior.

“That’s his opinion,” said Kenes Bowling, a spokesman for Unique. For 15 years, the company has operated a successful “materials collection” business as a debt collector for libraries, and it relies on its ability to threaten scofflaws with negative credit reports.

It is not clear how many library patrons are reported to credit bureaus, or how many of them have trouble getting credit as a result. The three main credit bureaus, TransUnion, Equifax and Experian, compile information from lenders and debt collectors and provide it to banks and other lenders who use it to estimate how likely a consumer is to repay a loan — and thus who should get credit and at what interest rate.

Federal regulations limit only how old a late payment can be before it is reported and for how long — seven years — that negative information can stay on a consumer’s record. It is up to credit bureaus to decide what kinds of payments to record, and they generally choose the ones that they think will be useful to the lenders who are their clients, said Rebecca Kuehn, assistant director of the Federal Trade Commission’s division of privacy and identity protection.

Experian and TransUnion accept reports from Unique, according to spokesmen for those companies, but only put debts of more than $50 on consumers’ records.

David Rubinger, a vice president at Equifax, initially said that the company did not accept reports of library debts. It would be unfair, he said, because not all libraries use a debt collector, and consumers whose libraries do not use them would have an advantage in the marketplace over people whose libraries do.

But on further investigation, Mr. Rubinger said that Equifax had received library reports without realizing it because the nature of a debt is not always clear in the records. The data was discarded because it lacked the numerical coding that the company required to categorize types of debts.

Traditionally, only loans and other debts in which the payments are made over time and assessed interest — such as mortgages, car notes and credit cards — end up on credit reports.

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In recent years, debt collectors in some states have reported rent and utility payments. Credit bureaus say the practice is a way for people who choose not to buy on credit to show that they pay their bills on time. Critics say the additional reports extend creditors’ reach.

Mr. Kleinman argued that if library fines are reported, they should also be used to establish a positive credit record.

“It should be the good, the bad and the ugly,” Mr. Kleinman said. “If you can report a library record, it should be balanced and should include all the times that a consumer visited the library and followed the rules.”

Mr. Bowling said fewer than 10 percent of the library patrons that Unique contacts about overdue materials and unpaid fines end up being reported to the credit bureaus.

Once a library debt is paid, Mr. Bowling said, even if it has been reported to a credit bureau, it usually has “minimal to zero influence on a person’s credit rating.” The amounts are usually too small to concern creditors.

But creditors do take notice if the report says the library patron has an outstanding debt or overdue materials, Mr. Bowling said. “So if I, for example, have an unpaid library debt on a credit report, and I apply for a mortgage, usually the creditor will not extend credit unless the debt is paid,” he said.

Steven R. Katz, a spokesman for TransUnion, said the best way to stay out of trouble is to pay all debts promptly.

“If you attempt to apply that rule across all your dealings, whether it’s a library book or a parking ticket or a credit card account, you’ll never have to wonder because you’ll know that you’re handling your finances in a responsible way,” he said.

Jeannean Kenney, a senior policy analyst at Consumers Union, which publishes Consumer Reports, said: “What will be shocking for consumers is a five-year-old library fine could affect your credit score. You don’t expect it to land on your credit report.”

A version of this article appears in print on , on Page B4 of the New York edition with the headline: How One Overdue Book Can Hurt a Credit Record. Order Reprints|Today's Paper|Subscribe